Friday, November 03, 2006

India notified the Prevention of Money Laundering Act, 2002. Certain amendments were made with effect from July 1, 2005. Further amendments are about to be made. These amendments will bring terrorism financing and customs offences under the glare of PML Act.

The amendments are significant as the monetary authorities in US, Europe and Singapore are not satisfied with the existing framework to curb money laundering in India and hence are not allowing our banks to freely operate and open branches in their countries.

FATF – Financial Action Task Force, a Paris based inter-governmental organization launched in 1989 by the G-7 countries, has sought for making insider trading in stock-markets also a money laundering offence. India has so far carried out 11 of the 20 categories prescribed by the FATF, it has been slow in bringing about amendments covering terrorism financing, customs offences, smuggling, piracy, insider trading in stock markets and environment. In the absence of these amendments the Indian banks are at a disadvantage to extend their presence in developed countries.

Money laundering shatters the economy through unpredictable changes in money supply, posing risks to the soundness of financial systems leading to loss of investor confidence and destabilization of financial systems.